Kahn-Reiss, Inc. v. Detroit and Northern Sav. and Loan Ass'n

• Decision Date: 24 February 1975
• Docket Number: INC,No. 3,KAHN-REIS,Docket No. 17255,3
• Parties: , Plaintiff, Counter-Defendant-Appellee, and Cross-Appellant, v. DETROIT & NORTHERN SAVINGS & LOAN ASSOCIATION, Defendant, Counter-Plaintiff, Appellant, and Cross-Appellee, and Frank A. Douglass Agency, Inc., Defendant-Appellant, and Cross-Appellee
• Court: Court of Appeal of Michigan — District of US

Page 816

228 N.W.2d 816

59 Mich.App. 1

KAHN-REISS, INC., Plaintiff, Counter-Defendant-Appellee, and Cross-Appellant, v. DETROIT & NORTHERN SAVINGS & LOAN ASSOCIATION, Defendant, Counter-Plaintiff, Appellant, and Cross-Appellee, and Frank A. Douglass Agency, Inc., Defendant-Appellant, and

Cross-Appellee.

Docket No. 17255.

Court of Appeals of Michigan, Division No. 3.

Feb. 24, 1975.

Released for Publication May 12, 1975.

John M. McCarthy, McLean & McCarthy, Houghton, for appellant.

Frederick N. Johnson, Houghton, for appellee.

Before ALLEN, P.J., and J. H. GILLIS and McGREGOR, JJ.

ALLEN, Presiding Judge.

This appeal from a two-part judgment, May 15, 1973, involves two issues arising out of a sale of property by plaintiff to defendant Detroit & Northern Savings & Loan Association. Issue I is the cross-appeal raising the question of whether or not plaintiff retained an easement of way over a portion of the land sold. On this issue, the trial court in Part I of its opinion found in favor of defendants. Plaintiff cross-appeals. Issue II concerns a boundary-line question of whether defendants could remove a concrete wall and chimney which defendants allege is on the property purchased from plaintiff. On this issue, the trial court in Part II of its judgment found in favor of plaintiff, and defendants appeal. For convenience purposes, defendant Detroit & Northern Savings & Loan Association will be referred to as D&N, and Frank A. Douglass Agency, Inc., as Douglass. References t lots and boundary lines relate to the map attached.

PART I

In December 1969, plaintiff granted an option to Douglass which was acting as agent for D&N for the purchase of lots 6 and 7 on the diagram attached. This option was drafted by plaintiff's attorney. Paragraph 7 provided:

'After the delivery of a Warranty Deed from Optioner to Optionee, Optionee shall be responsible for the maintenance, not including snow removal, of a suitable and passable means of ingress and egress to the East exit of the Pic Theatre Building, which is adjacent to the described real property. However, the parties hereto may agree to modify the existing route of ingress and egress On May 19, 1970, plaintiff by warranty deed conveyed to D&N all of plaintiff's interests in lots 6 and 7. The deed was drafted by D&N and totally omitted any mention of the easement referred to in paragraph 7. Both the option and the warranty deed were signed on plaintiff's behalf by Norbert Kahn as plaintiff's president and by Louise Rice, as plaintiff's secretary. Kahn was an experienced businessman who had assisted Douglass in acquiring other lots in the block and who, prior to the option, had negotiated with Douglass in regard to a fee which he claimed Douglass owed for this assistance. Kahn was a 40% Stockholder in Kahn-Reiss Corporation (his wife owned an additional 20%), a 50% Shareholder in the corporation-owned Pic Theatre and was the sole representative of Kahn-Reiss with Douglass on the purchase of lots 6 and 7.

prior to the execution of documents of transfer of title.' ¹

Some months after the execution of the deed, Kahn (who died prior to trial) raised the question of ingress and egress being omitted from the deed and apparently also discussed with Douglass the matter of his commission on other lots purchased by Douglass for D&N. Some time prior to June 17, 1971, Douglass and D&N informed Kahn they would settle the claim for services and the claim for ingress and egress by payment of $1500. On June 17, 1971, Douglass made payment by check to Jahn personally of $1500. No written release of the respective claims was secured from Kahn who informed Douglass when the question was raised 'You don't have to have any signature from me, my word is bond'. Previously, when lots 6 and 7 were purchased, the check was made out to Kahn-Reiss Corporation but was endorsed over to Kahn individually on the same day.

Following extensive trial on the issues raised in Part I, the court, in a written opinion, held against plaintiff, finding (1) that there was insufficient evidence to support mutual mistake, fraud or misrepresentation, (2) that as a matter of law, the option was merged in the warranty deed, Clifton v. Jackson Iron Co., 74 Mich. 183, 41 N.W. 891 (1889), (3) that the option as drafted was too indefinite and uncertain to be protected in chancery, (4) that Kahn acted with actual and apparent support for the corporation, and all claims were fully and completely released upon payment to him of the $1500. In its cross-appeal, plaintiff does not contest the trial court's conclusion on (1) but does claim error on (2), (3), and (4). Additionally, plaintiff argues that as a matter of law, plaintiff reserved an implied easement over lots 6 and 7 for vehicular traffic.

We do not agree with the trial court that as a matter of law the option agreement was merged and thus extinguished in the warranty deed. Clifton v. Jackson Iron Co., Supra, cited by the trial judge, did not involve an easement condition. That case concerned a contract for the sale of land reserving the right of removing growing timber for a specified time. Before the time ran out the owner conveyed the land by warranty deed without mentioning the right to remove the timber. The court held the deed nullified the timber-cutting rights. Neither did we find the cases relied on by plaintiff, Goodspeed v. Nichols, 231 Mich. 308, 204 N.W. 122 (1925), and Mueller v. Bankers' Trust Co. of Muskegon, 262 Mich. 53, 247 N.W. 103 (1933), each of which holds that a warranty deed does not extinguish a Collateral contractual provision, controlling. ² These cases, too, do Was the option too indefinite and uncertain to be protected and enforced by an equity court? Both parties acknowledge the general rule stated in Fox v. Pierce, 50 Mich. 500, 504, 15 N.W. 880 (1883), but differ as to whether it applies in this situation. This case was tried before the trial judge, who had the opportunity to examine the exhibits, listen to the testimony and assess its weight and credibility. The trial court's finding that the option was too indefinite will not be reversed unless we are persuaded that the determination was clearly erroneous. GCR 1963, 517.1. See Osius v. Dingell, 375 Mich. 605, 611--612, 134 N.W.2d 657 (1965). See also Levi v. Winters Floor Convering, Inc., 57 Mich.App. 226, 225 N.W.2d 693 (1974).

not involve an easement reservation. In fact, we can find no decision in Michigan involving the reservation of an easement and thus an open question exists as to whether or not a contractual provision for an easement is 'collateral'. Accordingly, we look to Chicago Title & Trust Co. v. Wabash-Randolph Corp., 384 Ill. 78, 51 N.E.2d 132 (1943). In that case the court held, Inter alia, that, where a purchaser's agreement to establish an easement which could not become effective until after delivery of their deed, the easement provision was not merged in the deed upon delivery of the deed so as to render such provision in the contract ineffectual. The court [59 Mich.App. 7] recognized the contractual easement provision as one which the delivery of the deed did not fulfill, hence rejecting the general rule that if terms of a contract for sale of realty are fulfilled by delivery of the deed, there is a merger of the contract and the deed. See also in this connection the helpful annotation entitled Deed As Imposing Upon Vendee Obligation Additional To, or as Superseding or Merging Obligations Imposed By, Antecedent Contract, 52 A.L.R.2d 647 (1957). The instant case closely parallels Chicago Title and Trust Co., particularly because the option paragraph calls for a condition 'after the delivery of a warranty deed'.

Fox v. Pierce, Supra, contained a statement which subsequently was adopted as the general rule in Stolte v. Krentel, 271 Mich. 98, 102, 260 N.W. 127 (1935), which noted that the following was the 'legal yardstick' by which the instant issue is to be governed:

'Now a right of way wich is too indefinite for a determinate description is too indefinite to be established and protected by the court of chancery. Assuming that the right which is actually in controversy, or rather the right which complainants contemplate, to be capable of such a description, the rule then applies that the complainant must so state his case that if admitted by answer, or proved at the hearing, the court can decree upon it. Has that been done? Are the means given to enable the court to declare in its paper decree exactly what right of passage exists, and of what shape and dimensions the place is, and precisely where it is located with reference to lot lines and permanent erections?' 50 Mich. 500, 504, 15 N.W. 880, 881.

Stolte, upon which plaintiff relies, has found that the description of the right-of-way was clear, and that the 'termini' of that right-of-way became 'monuments' which would control the courses and distances involved. Since the apparent purpose of the parties was inconsistent with a distance specifically recited in the agreement, the distance had to fall and the monuments controlled. 271 Mich. 98, 102, 260 N.W. 127. See also Murray v. Buikema, 54 Mich.App. 382, 387, 221 N.W.2d 193 (1974), which recognized this general rule. However, that rule does not really apply to our situation.

As noted in Fox, supra, we must determine whether or not plaintiff has Paragraph 7 of the option, recited above, provided that defendants were to maintain a 'means of ingress and egress to the east exit of the Pic Theatre building, which is adjacent to the described real property'. The 'described real property' was lots 6 and 7, whereas lot no. 9 was the lot onto which the east exit of the theatre opened, with lot no. 8 adjoining lot no. 9. The attorney who drafted the option agreement stated that Mr. Kahn wanted a right-of-way so that people may be able to get to the east exit, although it is clear that that exit was only a fire door and people did not enter the...